Can you jus­tify your Fixed-term Con­tracts?

It is im­por­tant for em­ploy­ers to en­sure that they are able to jus­tify the grounds for fix­ing a lim­ited du­ra­tion of em­ploy­ment and that there is full com­pli­ance with the rel­e­vant pro­vi­sions of the LRA in­so­far as en­sur­ing the pro­tec­tion of em­ploy­ees and avo

Since the im­ple­men­ta­tion of the amend­ments to the Labour Re­la­tions Act (LRA) in 2015, there have been sev­eral in­ter­est­ing judg­ments deal­ing with the jus­ti­fi­ca­tion for con­clud­ing a fixed-term con­tract of em­ploy­ment.

One such case in­volved two em­ploy­ers, who con­tracted with their client to pro­vide var­i­ous ser­vices un­til 2021. The em­ploy­ers then con­tracted a num­ber of em­ploy­ees, on fixed-term con­tracts of em­ploy­ment, in or­der to carry out these ser­vices to their client. The fixed-term con­tracts of em­ploy­ment in­cluded a clause which pro­vided for au­to­matic ter­mi­na­tion in the event that the com­mer­cial con­tract be­tween the client and the em­ploy­ers pre­ma­turely ter­mi­nated. By in­clu­sion of this clause, the em­ploy­ers were of the view that these em­ploy­ment con­tracts con­sti­tuted fixedterm con­tracts of em­ploy­ment.

Dur­ing Novem­ber 2016, the client ter­mi­nated the com­mer­cial con­tracts with the em­ploy­ers by giv­ing them one month’s no­tice. The em­ploy­ers then re­lied on the au­to­matic ter­mi­na­tion clause in the fixed-term con­tracts of em­ploy­ment and ter­mi­nated the em­ploy­ment re­la­tion­ship with their em­ploy­ees.

The Union rep­re­sent­ing the em­ploy­ees, launched an ur­gent ap­pli­ca­tion to the Labour Court in terms of s189(13) con­tend­ing that the em­ploy­ees were dis­missed for op­er­a­tional re­quire­ments as en­vis­aged by s189A of the LRA (re­trench­ments), and ac­cord­ingly the em­ploy­ers were un­der an obli­ga­tion to con­sult with the em­ploy­ees prior to ter­mi­na­tion of the em­ploy­ment re­la­tion­ship. In its ap­pli­ca­tion, the Union re­quested the Labour Court to or­der re­in­state­ment, there­fore forc­ing the em­ploy­ers to en­gage in con­sul­ta­tion with the em­ploy­ees as en­vis­aged in s189 of the LRA. The em­ploy­ers ar­gued that the em­ploy­ees were em­ployed on fixed-term con­tracts, which was ter­minable on the oc­cur­rence of a spec­i­fied event, namely the early ter­mi­na­tion of the com­mer­cial con­tract with their client, and as such s189 and 189A of the LRA was not ap­pli­ca­ble. The em­ploy­ers fur­ther ar­gued that the fixed-term con­tracts of em­ploy­ment were gov­erned by s198B of the LRA, which pro­vides that em­ploy­ees may be em­ployed on fixed term con­tracts or suc­ces­sive fixed-term con­tracts of em­ploy­ment for longer than three months if the na­ture of the work is for a lim­ited du­ra­tion or that the em­ployer can demon­strate a jus­ti­fi­able rea­son for fix­ing the term of the con­tract.

The Labour Court found that the em­ploy­ers failed to demon­strate jus­ti­fi­able rea­sons as the fixed term con­tracts of em­ploy­ment were not for a spe­cific pro­ject that had a lim­ited du­ra­tion. The client ter­mi­nated its con­tract with the em­ploy­ers, which re­sulted in the au­to­matic ter­mi­na­tion of the fixedterm con­tracts of em­ploy­ment. There was no ev­i­dence that a spe­cific pro­ject had come to an end as en­vis­aged by s198B of the LRA (be­ing one of the jus­ti­fi­able rea­sons set out in the LRA).

The Labour Court reaf­firmed the po­si­tion that em­ploy­ers can­not ter­mi­nate an em­ploy­ment con­tract at the be­hest of a third party as this un­der­mines the em­ployee’s right to fair labour prac­tice en­trenched in our Con­sti­tu­tion. Con­se­quently, the Labour Court or­dered the re­in­state­ment of the em­ploy­ees.